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Living Trusts

What is Probate and why does everyone want to avoid it?

What is a Revocable Living Trust?

What are the advantages of having a Living Trust?

Will I lose any control over my property if I create a Revocable Living Trust?

Do I have to transfer all my assets to my Living Trust?

If I transfer title to real property to my Living Trust can the bank accelerate my mortgage?





Q: What is Probate and why does everyone want to avoid it?

When a loved one passes away, his or her estate often goes through a court-managed process called probate where the assets of the deceased are managed and distributed.  If the assets of the deceased are owned through a well drafted and properly funded living trust, the court-managed probate process can be reduced and the trustee of the trust has more flexibility to administer the distribution of the deceased's assets.  The appropriate length of time for the probate process depends on the complexity and size of the estate and the local rules and schedule of the probate court.

The probate process for each estate is unique, but usually involves the following steps:

  • Filing of a petition or application with the proper probate court.
  • Notice to heirs under the will and statutory heirs (as if no will exists).
  • Petition or application to appoint Personal Representative (if nominated in the will) or Special Administrator for the estate.
  • Inventory and appraisement of estate assets by Personal Representative/Administrator.
  • Payment of estate debt to creditors.
  • Sale of estate assets under certain circumstances.
  • Payment of taxes (income and estate), if applicable.
  • Fiduciary Accounting reported to the Court.
  • Proposal for Distribution of Assets to the Court.
  • Petition or Application for Settlement of the Estate.
  • Legal Notice with detailed information must be lawfully provided to heirs under the will, statutory heirs (as if no will exists), and outstanding creditors or claimants.
  • Proof filed with the Court that Legal Notice with detailed information was lawfully provided to heirs under the will, statutory heirs (as if no will exists), and outstanding creditors or claimants.
  • Compliance with Court’s final order.
  • Final distribution of assets to heirs.


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Q: What is a Revocable Living Trust?

A properly drafted Revocable living trust (RLT) is a powerful estate planning tool that allows you to remain in control of your assets during your lifetime, have them managed during incapacity, and efficiently and privately transfer them to your loved ones at death according to your wishes.

Sometimes referred to simply as a Living Trust, an RLT holds legal title to your assets and provides a mechanism to manage them. You would serve as the trustee and beneficiary of your trust during your lifetime. You also designate successor trustee(s) to carry out your instructions for how you want your assets managed and distributed in case of death or incapacity.

In order for the Living Trust to function properly, you need to transfer many of your assets to your Living Trust during your lifetime. The fact that it is "revocable" means that you can make changes to it or even terminate it at any time.


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Q: What are the advantages of having a Living Trust?

Like a will, a Living Trust is a legal document that provides for the management and distribution of your assets after you pass away. However, a Living Trust has certain advantages when compared to a will. A Living Trust allows for the immediate transfer of assets after death without court interference.  It also allows for the management of your affairs in case of incapacity, without the need for a guardianship or conservatorship process. With a properly funded Living Trust, there is no need to undergo a potentially expensive and time consuming public probate process.  In short, a well thought out estate plan using a Living Trust can provide your loved ones with the ability to administer your estate privately, with more flexibility and efficiency.


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Q: Will I lose any control over my property if I create a Revocable Living Trust?

Creating a Revocable Living Trust and transferring your assets to the name of that trust will generally not affect your ability to control such assets. During your lifetime when you are mentally competent, you have complete control over all of your assets.  As the trustee of your trust, you may engage in any transaction that you could before you had a Living Trust. There are no changes in your income taxes. If you filed a 1040 before you had a trust, you can continue to file a 1040 when you have a Living Trust. There are no new Tax Identification Numbers to obtain. Because a Living Trust is revocable, it can be modified at any time or it can be completely revoked if you so desire. Upon your incapacity, the individuals you designate will be able to transact on your behalf according to the instructions you have laid out in the Living Trust. Upon your passing, the Living Trust can no longer be modified and the successor trustee(s) you have designated will then proceed to implement your wishes as directed.


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Q: Do I have to transfer all my assets to my Living Trust?

Assets with beneficiary designations such as a life insurance policy or annuity payable directly to a named beneficiary need not be transferred to your Living Trust.  Furthermore, money from IRAs, Keoghs, 401(k) accounts and most other retirement accounts transfer automatically, outside probate, to the persons named as beneficiaries. Bank accounts that are set up as payable-on-death account (POD for short) or an "in trust for" account (a "Totten Trust") with a named beneficiary also pass to that beneficiary without having to be titled into your trust. It is important, however, to seek the counsel of an experienced estate planning attorney who can advise on and assist with transferring necessary assets to your trust.


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Q: If I transfer title to real property to my Living Trust can the bank accelerate my mortgage?

Federal law prohibits financial institutions from calling or accelerating your loan when you transfer property to your living trust as long as you continue to live in that home. The only exception to the federal law, enacted as part of the 1982 Garn-St. Germain Act is that it does not provide for such protection for residential real estate with more than five dwelling units.


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